To Share, or Not to Share?

B2B CFO partner Mark Nuelle from Connecticut shared this article with me. How do you feel? Share the financials or not? To what extent?

Sharing financial data with their company’s employees doesn’t come easy to many CFOs — even sharing it with their own finance team. Seventy-six percent of the 1,300 U.S.-based CFOs at private companies with 20 or more employees don’t state quarterly or annual financial updates with employees, a survey released this week by Robert Half Management Resourcesfound. Just 17% of those respondents, however, share financial information with “select” employees only.

“If you told me it was 80% or 85%, that would not surprise me either,” says John McGonigal, managing director at Smart Devine, an accounting and business advisory.

Frequently, the big concern of finance chiefs at companies in the process of going public is that “the day they file their initial S-1 statement [the public-company registration form] is the first time their competitors can see their information,” he says. Although private companies often must share their financials with their lenders and investors, they have no regulatory obligation to share them externally in the way public companies do.

CFOs of closely held private companies with shares owned by only a handful of individuals may find it even harder to communicate. As McGonigal notes, closely held companies tend to share less financial data than when there are groups of employees who own stock.

Nevertheless, senior financial executives willing to loosen up a bit with the numbers may find it can help align employees with company goals, Paul McDonald, a senior executive director at Robert Half, says. CFOs can use their financial data to engage employees and motivate a company’s workforce, he says. “You could talk about percentages. You could talk about gross margin, SG&A (selling, general and administrative expenses), and then wrapping those all into the overall objectives of the organization.”

Indeed, executives may not need to tell all to get the desired results. “You don’t have to give them the complete financial overview of revenue and net operating profit down to the dollars and cents,” adds McDonald. But sharing limited data is helpful.

So what’s the best way to do that? Before sharing a company’s financial statistics with employees, a CFO should determine the right amount of data to be shared, how often to share it, and whether to use a town hall meeting or other kind of presentation to get the message across, says Smart Devine’s McGonigal. For private companies in general, he says, semiannual communication seems appropriate.

Having an in-person presentation for employees in the office and a live feed for workers based elsewhere can help private companies work toward better financial communication, McGonigal adds. For companies that employed this method, he notes, “the message was getting out consistently to the employee groups.”

Private-company CFOs who actually present financial data rather than merely handing out written documents can better maintain control of the data and keep certain items confidential, says McGonigal. The most successful ones, he notes, “didn’t hand out a piece of paper where somebody might be able to walk out of the room with [it].”

Indeed, CFOs must be careful about sharing problematic information, such as sales for a particular geographic area. “That could mean something as simple as creating a competitive disadvantage should the information get outside of the walls of the company,” he says.

Keeping employees abreast of a company’s current financial situation can also ensure good communication on other levels and even help to squash rumors that could be festering. “Today, more and more employees are keenly aware of what’s going on around them,” says McGonigal. “They know that the financial stability of their employer has a direct effect on their personal lives, so they are more interested as a group.”

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